These 3 Stocks Plummeted in 2013 -- Do They Have What It Takes to Bounce Back?

It's been a long 2013 for Abercrombie & Fitch (NYSE: ANF  ) , J.C. Penney (NYSE: JCP  ) , and Rackspace Hosting  (NYSE: RAX  ) , all of which have seen significant plunges in their stock price year to date. Let's take a look at what sparked such a disastrous year for these three companies, and see which could be looking at the potential to bounce back in 2014.

By the numbers
The numbers don't lie for these three; check out the colossal year-to-date loss:

Company

Start of 2013 Price (Jan. 2)

Current Price (Dec. 13)

YTD Loss

Abercrombie & Fitch

$47.97

$31.92

(33.46%)

J.C. Penney

$19.71

$8.57

(56.57%)

Rackspace Hosting

$74.27

$34.92

(52.98%)

Source: Google Finance.

ANF Chart

Abercrombie & FItch data by YCharts.

As the graph and chart show, two of the three even experienced losses of more than 50%. So, what led to the downslide? Let's go company by company.

Industry downfall
Abercrombie & Fitch was the best of the worst here, "only" dropping about 33% this year. While this is still a serious plummet, many signs suggest there's less cause for concern than meets the eye. This is because it wasn't just Abercrombie that struggled: Much of the industry, including competitors Aeropostale (a loss of 37.4% year to date) and American Eagle Outfitters (a loss of 30.9% year to date), saw much of the same trouble that Abercrombie did.

The fact is that many consumers, in an uncertain economy, have lowered their spending on luxury goods. The apparel industry has seen a large drop this year, although like most of the industry, Abercrombie did bounce back a bit at the end of the year. (We'll come back to that.)

CEO woes
J.C. Penney's trouble, unlike Abercrombie's, is much clearer (and a result of its own actions). A string of unsuccessful CEOs has collapsed the company this year amid much more respectable numbers from competitors like Macy's.

Former CEO Ron Johnson, in an effort to change the face of the company, sent it spiraling instead. The retailer's model was formerly based upon big discounts and coupon offers in addition to stocking popular house brands; Johnson eliminated many of the discounts the company offered and completely changed the stock of clothes. In short, although Johnson is no longer CEO, J.C. Penney is still trying to unload many of the clothes he brought in, not to mention at incredibly low prices.

A good drop?
Rackspace Hosting's losses are also pretty clear. Management at the hosting company has openly noted that they are spending huge amounts of money, between $460 million and $510 million, on capital expenditures. Chief Financial Officer Karl Pichler cited "accelerating and globalizing the launch of [Rackspace's] performance cloud" as the reason for the massive spending increase. This helps to explain the recent 40% drop in net income.

Which, if any, of the three companies can bring it back in 2014? Let's take a look.

Back on track?

Company

Analyst Growth Estimates 2013

Analyst Growth Estimates 2014

EPS Estimates 2013

EPS Estimates 2014

Abercrombie & Fitch

12.40%
Industry: 12.80%

20.50%
Industry: 21.10%

1.47

2.29

J.C. Penney

(70.30%)
Industry: 5.90%

55.00%
Industry: 21.70%

(5.96)

(2.68)

Rackspace Hosting

(18.70%)
Industry: (1.90%)

24.60%
Industry: 27.30%

0.61

0.76

Source: Yahoo! Finance.

ANF EPS Diluted (Quarterly) Chart

Abercrombie & Fitch EPS diluted (quarterly) data by YCharts.

Despite the woes this year, Abercrombie began to bounce back at the end of the year, and it looks poised to continue this trend into the new year as it enters 2014 by cutting costs and closing underperforming stores while also expanding into new international markets. Furthermore, online sales increased 10% year over year and the company's kids store outpaced most of the industry. Look for the company to bounce back next year, barring an industrywide disaster like the one this year.

As for J.C. Penney, it too has begun to bounce back near the end of the year. As it unloads much of the undesirable apparel acquired during Johnson's tenure, it is getting back on track and improving sales and gross margins slowly but surely, lifted by having popular brands back on the shelves. While it may be a while before it is back on track (see earnings chart), it is certainly on the right path.

Finally, Rackspace Hosting, while its problems were the least worrying of the bunch, is still not a lock for a bounce back in the coming year. While the company's increased capital expenditures in the segment bringing in the most profits are important, its traditional Web-hosting segment is significantly slowing. Furthermore, Rackspace is still trading incredibly high compared to the company's estimated earnings (see earnings chart).

Foolish bottom line
While these three companies plummeted in 2013, watch for them to bounce back next year based on stronger economic conditions and reverting to their old, profitable ways. Of course, it could be a while before each of these three is back on track, but signs are pointing toward each of them making the right moves.

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